Cassandra Does Tokyo is a former hedge fund manager and ex NY Trader, who is now living abroad.

~~~

ETFs clearly can provide some advantages for obtaining otherwise-expensive-to-obtain exposures for thematically-oriented investors. More noteworthy perhaps is the way that such vehicles have captured the imagination of Promoters and Managers as a salvation for otherwise stagnant revenue growth. This has lead to a proliferation of ever-more-focused ETFs to cater to the evolving fancies of investors looking for errrr… umm… something, indeed anything different. I would like to add my two-cents worth here and now, so BlackRock, take note: Here are some candidates for your marketing machine to focus on for the next decade:

Rent-Seeking ETF – While the maxim “Death and Taxes” is known to all, few realize that the original phrase was “Death, Taxes and Corruption”. Indeed Companies that purchase influence, contracts, and favorable legislation/regulation are worthy of investor attention (not because they are more dynamic, which they aren’t) but because they have a definable edge – something many others cannot boast about. Of course, ETF marketers would need to sanitize the pursuit into something like “Government Partnership Focused ETF” or

Gilded-Age ETF – Anyone who does their own shopping cannot ignore the the increasing gulf between winners and losers. As the a large portion of the former middle class sinks lower, a smaller but not reasonably-sized segment is promoted higher. This phenomena has meaningful effects ETF marketers can exploit as those companies focused upon the top-layer and growing underclass relatively prosper as the expense of the middle market. This ETF might have Whole Foods (WFMI) and Coach (COH) alongside pawnshops, check-cashing firms, pay-day loan enterprises and dollar discount stores.

Sin-City ETF – Booze, Cigarettes, Recre-ceuticals, Trans-Fats-In-A-Bag-To-Go, Espionage and surveillance equipment, Gambling, Porn, all in a neat little exchange-traded bundle. Reasonably recession-proof. High-profitability. Growing (except tobacco). Need I say more…?

Follow-The-Insider ETF – Alpha is getting harder to achieve these days. Covert insider-trading is getting riskier (just ask Raj!). But we know from some of the recent academic research that there is information contained in selective but systematically definable insider purchases and sales that yields abnormal excess returns. This is an easy one to flog, and panders to the twin pillar retail beliefs that “the market is rigged” and “it is nearly impossible for Average Joe to beat the market.

New Age ETF – Even tree-huggers have money to invest and would benefit from a convenient vehicle. And their numbers along with greater public awareness of what is environmentally good an bad, healthy or unhealthy, kharmically or spiritually desirable will make this a winner. The allure of this ETF is that it has many degrees of freedom in which to invest – from alternative energy, to agriculture and food science, from any company with sustainable approach to yoga-mat and acupuncture needle manufacturers. Build it (and advertise it convincingly) and they will come…

Bugger-The-Shorts ETF – This ETF, which will concentrate highly-shorted and crowded short stocks, may appeal to several classes of investor. First there are those that philosophically dislike the short side of the market – whether for moral or philosophical reasons. But there are also those devilish mischievous investors who can smell easy prey, and get sadistic pleasure out of squeezing weak (or system-driven) shorts out of their positions for fun and/or profit. This could potentially be popular with hedge funds as a way of quickly reversing exposure when they’ve been plunging themselves and find their positions on the wrong side of vicious pops so characteristic of bear-market rallies.

Activists Choice ETF – An ETF focusing on trumpted or reported positions disclosed by so-called activist investors are a so-called lay-up for ETF promoters. Primarily because activists themselves are such wonderful self-promoters, and quite adept at talking their own books. But also because they can tout “a hedge-fund strategy and performance without hedge fund fees” – always a winning slogan in the aggregation of retail funds.

Orlov’s ETF – With an increasing number of doomsdayers crawling out from all crevices, under the svengali-like piping of Glenn Beck, subscribing to Dimitry Orlov-like visions of the future, perhaps an ETF focused on a belief in the coming unravelling would sell well. Manufacturers of home generators, self-sufficiency tools, small arms and ammo, micro-water-purification systems, drought-resistant seeds, land-mines and barbed-wire, as well as gold-miners, and private prison and security services all could have a place in this portfolio. The only draw back is the non-sequitir if investors peer too far into the future where property rights and the financial system dissolve into complete chaos…

The “US Healthcare System Is The Best” ETF – Americans have a peculiar love affair with their Health Care system, irrespective of how completely buggered it is in comparison to the rest of the civilized (and much of the recently civilizing) world for the insured (as well as the uninsured, and financiers of both). ETF promoters can exploit this inexplicably visceral love-affair by helping them put their money where their mouth is, and creating the market-traded basket that invests a portfolio of companies prospering from a continuation of US Healthcare haplessness.

Greying Demographics ETF – Another obvious marketing target with many degrees of investment freedom, that are increasingly visible to investors. Motorized buggies, time-shares, home-health monitoring, nutraceuticals, senior-assisted living, bingo and slot-machine manufacturers, all in a single portfolio.

The Two-Cent Nickel ETF – Americans can rarely resist a bargain. As America slides closer to Japanification, ETF marketers might take a page from the Japanese Investment Trust playbook which for years has sported The Hidden Asset Trust or similar fund focusing upon companies with net substantial real assets well below market values, particularly where such assets are not reflected on the books of the company at current market values. Some of these assets are land, subsidiaries, other securities that provide seductive teasers to bargain-hunting investors. Of course, they must be careful not to rely too heavily upon Japanese experience for performance comparisons.

Fund of Fund of Hedge Funds ETF - The Coup de Grace offering must be the Fund of Hedge Fund-of-Funds to give the punter access to the broadest participation of hedge funds, something the small-punter has arguably had difficulty in obtaining. And in an exchange traded vehicle where they can dump their exposure at the first sign of distress. The remarkable attribute of this ETF (from the industry’s perspective) must be the multiple fee dollops that are removed from investors’ investments on a monthly basis. This is truly the ETF Triple Dip straight from the in the Wall Street’s finest creamery! But even better for the true skeptics, I know that you are thinking more like John Paulson, so if only someone (Hello GS!) can create for us a synthetic version of this that we can short, we too might find a good way to participate in the fee bonanza.

Of course, this is by no means an exhaustive list, as I am certain to have left some other crumbs on the table, so please feel free to submit your own additions.

~~~

Originally published at Cassandra Does Tokyo

Category: ETFs, Humor

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “ETFs For a Brave New World”

  1. Expat says:

    HAha! The Landlady from Kung Fu Hustle. What a great movie.

  2. MorticiaA says:

    What’s the trading symbol for the Sin-City ETF? I want some of that one!

  3. spencerh says:

    Good list. Some enterprising fund managers are surely mining this post as we speak.

  4. VennData says:

    How DARE she say American health care isn’t best.

    Living in a foreign countr(ies) and seeing for yourself and being able to compare for yourself isn’t enough. You have to believe in the health care lobbyists and HATE Obama to properly understand our greatness, statistics be damned.

    I’m never buying this blog again.

  5. jpl says:

    I wrote to Tom Price asking if he was willing to repeal the 70′s law that mandates hospitals to treat everyone in the ER. If you don’t know who Tom Price is, google him. Anyway he or his staff never responded. I guess he’s in the let them eat cake crowd.

  6. another instantiation of the benefits provided by “Humor/Satire”..

    here: Gilded-Age ETF – Anyone who does their own shopping cannot ignore the the increasing gulf between winners and losers. As the a large portion of the former middle class sinks lower, a smaller but not reasonably-sized segment is promoted higher. This phenomena has meaningful effects ETF marketers can exploit as those companies focused upon the top-layer and growing underclass relatively prosper as the expense of the middle market. This ETF might have Whole Foods (WFMI) and Coach (COH) alongside pawnshops, check-cashing firms, pay-day loan enterprises and dollar discount stores.

    Sin-City ETF – Booze, Cigarettes, Recre-ceuticals, Trans-Fats-In-A-Bag-To-Go, Espionage and surveillance equipment, Gambling, Porn, all in a neat little exchange-traded bundle. Reasonably recession-proof. High-profitability. Growing (except tobacco). Need I say more…?
    ~~
    We see The investment paradigm of the *Future, provided one can lay aside: “The only draw back is the non-sequitir if investors peer too far into the future where property rights and the financial system dissolve into complete chaos…”
    ~~
    (Mirror necessary) to see the “y”-shaped ‘Economic Recovery’ + the insight of the on-going Bull Market that is the 168. Track n’ Trace “Economy”/”Poli-Sci-Fi Pachinko Parlor”

  7. call me ahab says:

    I got into a debate w/ Cassandra about a year ago regarding mandatory voting (which she thought was absolutely essential)- my take was a bit different-

    for if I am free- I am free not to do do something- right? I can chose not to vote- right?

    lost a lot of respect after that argument

  8. call me ahab says:

    . . .and I’m still waiting for my 3X gold plated Tungsten ETF- they can call it GAG (Good as Gold) or possibly UFG (Unlimited Fool’s Gold)-

    it’s a winner

  9. TakBak04 says:

    A good one BR…haven’t read “Cassandria Does Tokyo” in many months.

    It’s good to capture the SNARK:

    And, this one:

    Sin-City ETF – Booze, Cigarettes, Recre-ceuticals, Trans-Fats-In-A-Bag-To-Go, Espionage and surveillance equipment, Gambling, Porn, all in a neat little exchange-traded bundle. Reasonably recession-proof. High-profitability. Growing (except tobacco). Need I say more…?

    ——

    I love this because for us “Dividend Inwestors” :D) we just love ALTRIA! Buy SIN, PORN and DEVIL’s WORKSHOP…and don’t forget the DEFENSE STOCKS…Halliburton, Anyone? What about that Guy named “XE” who moved to DUBAI!

    GACK!

  10. davefromcarolina says:

    I could swear Merrill had something very like a “Fund of Hedge Fund-of-Funds” offering in the summer of ’07…they were gonna let The Little People in on the game. I seem to recall David F. Swensen’s name being repeated every few minutes during the pitch.

  11. lalaland says:

    how high would capital gains taxes have to go to stop this bullshit?

  12. Clem Stone says:

    Lever Zero ETF – an inverse basket of all highly leveraged ETFs which will profit as they all slowly go to zero.

  13. @MorticiaA,

    What’s the trading symbol for the Sin-City ETF? I want some of that one!

    I believe that one is STD

  14. DeDude says:

    How about the “Low CEO Pay” EFT. I would put a lot of money into an ETF that specifically invested in companies where the compensation for management was at least 20% less than average for comparable companies. A company who’s management is not stuffing the board and raping the shareholders got to be worth investing in.

  15. jrm says:

    I believe a sin city ETF already exists. It’s called the Vice Fund and is listed in Texas. Add video games to the list ?